Somebody pressed a button and knocked the market into positive territory at the last minute, otherwis we might have had a pretty nasty reversal to the downside. This morning we had a very strong rally that went right into 1230, where we apparently hit some resistance, just short of the 50dema (the simple average is now just above 1250). What the late buying prevented was a change in the Elder impulse chart, which possibly would have gone blue, but as it is now, it is still green, and MACD histogram is still rising. This may or may not turn into a bull trap, but if you were watching the leading stocks today, you saw several collapses, so we may have just hit a top for now.

The Nasdaq was going to be the first to test resistance, and so far it has failed. It was rejected after briefly breaking through, and closed below the open, sending CMF back negative. We still have the green bar here, an MACD histogram rose as well, but may be about as high as it is going to go for now.

The Russell 2000 has a long way to go to catch up with the rest of the market, and today did not help it at all. It did successfully test the prior resistance, which is now support, but is way off the next level of resistance, and is now about to contend with the 50dema.

Ticker

Relative Strength Index (14)

XLU

59.22

XLP

56.8

XLV

55.67

XLY

53.42

XLB

51.63

XLI

51.28

XLK

51.05

XLF

50.32

XLE

50.08

Here are the sectors ranked by RSI. There aren;t too many changes from lst week, the biggest being XLE dropping to last place.

XLU has actually had the lowest gain among the sectors for the last week, but it was good enough for it to hold on to first place. This may actually gain relative is the market is topping out here and starting a pullback. It is close to breaking out to a new high, but I think that is going to be a major struggle.

XLE slipped into last place because it was only the 4th best performing sector this week (the best was XLF, which kept it pout of last place). one of the signs of a weak rally is that the weakest sectors make the biggest moves up, and we are certainly seeing that now. this is now right up against some serious resistance, so how it behaves tomorrow may very well tell us about the immediate future direction of the market.

We may be now seeing the resistance I was expecting at 1250. We may fight through it for a while, but ultimately believe we will fail somewhere in here, just in time for September, historically the worst month of the year for stocks. We might be in for another wild ride.

FUEL is not very heavily traded, so the chart pattern is a little rough around the edges, but it was one of the few successful breakouts today. The price relative line hit a 6 month high early this month, which was telling us something was up here.

TAYD is even worse from a thinly traded perspective, and although the price relative did break out before price, it really isn;t that impressive. The chart pattern isn't that good, even adjusting for the low volume, and i do not trust straight off the bottom breakouts. I would be surprised if this went much higher in the near future.

Here are the industries with 70% or more of their stocks advancing today.

Here are the industries with 8% or more of their stock making new highs.

I fudged the lists a little bit to get REIT-Residential on both lists. This is still a leading industry, despite the pounding it has taken in the last month. It now appears to be regaining it's footing. Most of the charts in this group look similar: very big gouges in the charts, followed by a bounce back up, the stronger stocks bouncing to at or near new highs. In hindsight, this probably was the group to get into when the market turned.

It looks like trouble may be developing on the leadership list. We have high volume reversals in RGR, HANS, and CF, and these are probably going to be increasing in volatility. PSMT is still moving up after it's recent breakout. CMG is making a move above the 50dma, LULU is moving below it's. New highs: RGR and PSMT.

I have about 780 stocks hitting new highs in price relative yesterday, which tells me that a problem I though I had solved is not solved: I want to scan for breakouts in price relative, and I am still picking up those that have previously broken out. I will try to get that solved before the beginning of next week,which by that time I should have plenty of data to work with.

On the other spreadsheet I have new price relative highs on BKI, CF, HANS, RGR, and PSMT

This is a bit of a surprise, not that we are going higher, but that we are currently screaming higher. Apparently the "no resistance" zone between 1210 and 1250 really is no resistance. Once again, I am having trouble picking out pivot points, as I always do when the market goes straight up (or down). Today's leading sector is XLI, with XLB, XLE, and XLF bunched together in second place. Lagging are XLU, XLP and XLK. Hmmm, the Nasdaq and Russell 2000 are both lagging, the Russell quite badly.oil is up, gold is down, treasury yields up and rising. Normally that is a bullish prognosis, but watch that Russell.

I have 46 new highs and counting so far, with breakouts in JAZZ, MAKO, and WTSLA. I guess yesterday wass the big day for breakouts. I am still waiting for reports from CVGW and BRID, but nothing so far.

Today may not have been tht impressive, but it certainly could have been a lot worse. The market was in the process of tanking after teh Conference Board consumer confidence numbers came h=out haf an hour into the seesion, but what that did instead was cement a support level at 1195. We rallied from there, propelled in the afternoon by the release of the FOMC minutes, in which a near panicky Fed is contemplating several steps to take, nn of which will fix anything but the markets. However, that is exacly what the market is looking for. I am still looking for a test of simple 50dma, which is now abot 1258 and dropping (the exponential average is about 20 points below it, so we will tet that first). MACD histogram is still rising, so I do not expect any sudden reversal, but sudden reversal never are expected.

Crude oil is working it's way back up, but is now facing it's first real resistance level, and is also coming near the 50dema. this will rise if stocks rise, and won;t if stocks don't.

Gold, on the other hand, seems to be in a world of it's own, ignoring every other market out there. It came down to perfectly test the bottom of it's current trading range. I do not expect a breakout any time soon, as gold has a history of staying in trading ranges for months. but, as I said, this is now in a world of it's own.

The ten year treasury has done a whole lot of nothing after it collapsed late in July. The small size of the move up shows the bond market is not nearly as optimistic about the Fed's ability to fix things as the stock market is. I don't argue with these guys.

Also doing a whole lot of nothing is the dollar. This should have been rising while the market was screaming down, but it didn't. It is also not collapsing as the market is rallying. Something is disconnected here, and I hope it doesn't cause trouble in the future. So far, it hasn't, at least that I can see.

I read some of the minutes of the last FOMC meeting, and was struck by two points: the FOMC is "comcerned" about the lack of progress in the recovery (read "panicking"), and there is an increased level of dissatisfaction among the dissenting FOMC members, who seem to feel the Fed is wasting time. The next meeting will be very interesting.

PSMT was already a leading stock when it became the second of the discount and variety stores group to break out in as many days. This actually has one of the weaker price relative lines we have looked at recently, but it still broke out before price. This look like a double bottom pattern, which would have an O'Neil breakout point at the blue horizontal line (which means you would have bought it yesterday), but I don't believe the pattern is long enough to be a valid double bottom. It still looks quite impressive, though.

The third of the discount stores to break out, DG broke out big on earnings, but price relative broke out nearly 3 weeks ago. CMF has risen dramatically since this hit the bottom of it's latest base, which broke the 200dma. I'm not thrilled with the rising ATR line for the last month, but the overall market volatility most likely has had the biggest influence on that.

NUS had a nice little breakout today a few days after a breakout in price relative, which held steady while price was dropping. I did not see a reason for the high relative volume, but I suspect it got targeted by high frequency traders when it hit a new high.

Here are the industries that have 75% or more of their stocks advancing today.

Here are the industries with 10% or more of their stocks making new highs.

There are a lot of industries with high 40 week averages making advances today, so those may be groups that are regaining some strength. Discount and variety stores is not a leading group, and according to it's graph it has been in a weakening trend for about 2 years. It does, however, have a proportionally high nunber of stocks making new highs. DLTR broke out yesterday, and today we have breakouts in PSMT and DG, but the rest of the group is still pretty weak. However, they have shown a tendency to move as a group, so several of the lagging stocks may provide some opportunities here.

On the leadership list, RGR is, I suspect, in the midst of a climax run here. I think it has a pretty good chance of hitting 38, but it also has a strong chance of collapsing at any time. PSMT is staging a breakout. AG is coming off the 50dma, and CF is continuing it's recent strong move. New highs: RGR, PSMT, CF, HANS.

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About Me

I am not a financial professional, just a guy that trades my own account.
I am also not a musical professional, just a guy that makes music on the computer. Thus, two blogs, one trading and on musical.
And, no, the picture is not me, it is the late, great John Belushi, one of the inspirations for these blogs.

About ThIs Blog

This blog is focused on technical analysis of stocks and markets, putting heavy emphasis on chart analysis. My trading style is derived primarily from my mentor, William "Yoda" O'Neil, and the focus here is on leading and breakout stocks, but all forms of trading are covered to some extent. Economic and political news that effects the market are also topics here, and the blog may occasionally become a platform for my political and philosophical ranting. I keep several spreadsheets on Google docs which track various aspects of the market and readers are welcome to vies and comment on them.

Google Docs Spreadsheets

There are several spreadsheet that I maintain on Google docs to track various watchlists and trends in the market.

1. The earnings list - a group of small and micro cap, low float stocks that have exhibited recent rapid earnings growth. They are modeled along the lines of William O'Neil's CAN SLIM system, but limited to small cap, highly volatile stocks.

2. The relative strength list - a group of stocks which are near 52 week highs and have shown an increase in average daily volume. The list is limited to the top 200 stocks according to my methodology, which will be detailed on one of the pages of the spreadsheet.